Iflix And The Emerging Market Opportunity For Video

Subscription video service Iflix yesterday announced that it had secured $133 million in a new round of funding. It brings the total investment in the company to date to $298 million. Iflix was launched in Malaysia in 2015 and originally focused only on the South East Asian markets. It is now available in 19 countries, having expanded into the Middle East and North African markets. Priced at around $3 per month, subscription to the service costs less than half the price of global SVOD leader Netflix, and Iflix is aiming, in the words of its CEO Mark Britt, to provide “a new service for the mass markets”. Britt went on to state: “If Netflix is the iPhone of content streaming, our aspiration is to be the Android.”

Elite Versus Mass Market SVOD Strategies

Iflix has cannily recognised that Netflix, despite its much-publicised push into international markets—which in Q2 of 2017 finally reached 50% of subscribers, has a fundamental challenge in penetrating emerging markets. Due to its entry price point Netflix is a premium video service proposition in emerging markets. Its entry price point in Malaysia is RM33, three times as expensive as a monthly Iflix subscription at RM10. Iflix has also made a point of investing significantly in local content, which helps to differentiate itself from larger US competitors. Alongside licensing local content, Iflix has commissioned its first original series Magic Hour, a comedy drama based on the Indonesian film of the same name and to be localised for Malaysia, The Philippines and Indonesia. And it has signed a deal with a Malaysian film studio to stream its films 20 days after they complete their theatrical screening run.

The Global Video Opportunity

Netflix alone has recorded a 24% year-on-year increase in paid subscribers between June 2016 and June 2017, with 77% of these additional subscribers coming from international markets. Globally there are now 300 million SVOD subscribers, and with monthly video consumption projected to reach 50% by 2019, this year’s estimated $31 billion in SVOD revenues can be expected to continue the 20% year-on-year growth experienced in 2017.

Crucially for the SVOD services currently competing for a slice of this growing market, it is in the emerging markets that additional growth will be the most rapid. This is due to the combination of significantly higher penetration rates for the major SVOD services in North America, Europe and Australasia, and the current level of technological adoption in these emerging markets. China, India, and Brazil have all demonstrated the phenomenon of emerging markets to leapfrog legacy consumer technologies and move straight on to the latest iteration of the technology when their increased disposable income permits. The bypassing of fixed line phones in favour of mobile phone adoption is a clear example of this trend playing out. With countries such as Indonesia and Sudan having negligible pay-TV legacy penetration rates, it is much easier to sell the idea of SVOD as the default video solution, thereby bypassing the cord-cutter phenomenon. The push to monetize these audiences therefore resolves around the price points and the content proposition, and, right now, Iflix is winning the battle.